Alabama v. Fed. Deposit Ins. Corp.

840 F.Supp.2d 1305

The State of ALABAMA, Department of Revenue, Plaintiff,

v.FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for Colonial Bank, and Branch Banking and Trust Company, as Successor in Interest to Colonial Bank, Defendants.

Case No. 2:11–cv–272–MEF.

United States District Court,

M.D. Alabama,

Northern Division.

Jan. 17, 2012.

David Edward Avery, III, Alabama Dept. of Revenue, Montgomery, AL, for Plaintiff.

Henry Hamilton Hutchinson, James Northcutt Walter, Jr., Michael Courtney Williams, Richard F Calhoun, Jr., Capell & Howard, P.C., David R. Boyd, Walter Joseph McCorkle, Jr., Balch & Bingham, Montgomery, AL, Jeffrey E. Schmitt, Federal Deposit Insurance Corporation, Arlington, VA, Bingham David Edwards, Jr., Harold H. Boles, William Clark Watson, Balch & Bingham LLP, Birmingham, AL, for Defendants.

Memorandum Opinion and Order

MARK E. FULLER, District Judge.

I. Introduction

This cause comes before the Court on Branch Banking and Trust's (BB & T) Motion to Dismiss (Doc. # 8). The Alabama Department of Revenue (ADOR) initially brought suit against the Federal Deposit Insurance Corporation (FDIC) and BB & T for the payment of taxes incurred by Colonial Bank and its various affiliates, claiming that both the FDIC and BB & T were successors to the failed bank's liabilities. BB & T now moves to dismiss, contending that the Purchase and Assumption Agreement it entered into with the FDIC does not contemplate BB & T owing the ADOR for back taxes owed by Colonial Bank and its affiliates. After careful consideration of the arguments of counsel and the relevant law, the Court finds that BB & T's motion is due to be GRANTED and the complaint DISMISSED without prejudice.

II. Jurisdiction and Venue

The Court has subject matter over this case under 12 U.S.C § 1821(d)(6)(A) (allowing judicial determination of claim on deposit insurance fund). The parties do not contend that the Court lacks personal jurisdiction over them, nor do they dispute that venue is proper.

III. Legal Standard

A motion to dismiss mainly tests the legal sufficiency of the complaint. Fed.R.Civ.P. 12(b)(6). It does not delve into disputes over the proof of the facts alleged—such a crucible is reserved for the summary judgment stage. With this in mind, the Court accepts as true all well-pled factual allegations in the complaint, viewing them in the light most favorable to the plaintiff. Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.2008); Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1057 (11th Cir.2007). And while a court typically keeps its motion to dismiss inquiry within the four corners of the complaint, the Court may nonetheless consider an outside document when it is undisputed and central to the plaintiff's claims. Speaker v. U.S. Dep't of Health & Human Servs., 623 F.3d 1371, 1379–80 (11th Cir.2010). The Court will grant a motion to dismiss “when, on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action.” Marshall Cnty. Bd. of Ed. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993).

A motion to dismiss also requires compliance with some minimal pleading standards. Indeed, although a plaintiff's complaint generally need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), the plaintiff must still allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). And “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). The plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 559, 127 S.Ct. 1955. Nor does it suffice if the pleadings merely leave “open the possibility that a plaintiff might later establish some set of undisclosed facts to support recovery.” Id. at 561, 127 S.Ct. 1955.

IV. Background¹

This case has its genesis in the failure of Colonial Bank. On August 14, 2009, the State of Alabama Banking Department closed Colonial Bank and appointed the FDIC to act as receiver. (Doc. # 1 at ¶ 5.) On the same day, the FDIC marshaled Colonial Bank's assets and then entered into a Purchase and Assumption Agreement with BB & T. (Doc. # 8–1.) Meanwhile, the Alabama Department of Revenue (ADOR) sprung into action, assessing a bevy of taxes owed to it by Colonial Bank and four of its affiliates—The Colonial BancGroup, Inc., CBG, Inc., CBG Investments, Inc., and CBG Nevada Holding Corp. (Doc. # 1 at ¶¶ 30, 42, 57, 76.) The assessments claimed that Colonial BancGroup and Colonial Bank's four subsidiaries owed taxes for the years 1998 to 2007 totaling $158,287,023.31.² ( Id. at ¶ 13.)

Based on these assessments, the ADOR filed claims with the FDIC. ( Id. at ¶ 10.) After much delay, the FDIC eventually disallowed the ADOR's claims, stating, “This claim has not been proven to the satisfaction of the Receiver.” ( Id. at ¶ 18.) The ADOR appealed this determination, seeking a fresh review of its claims in federal court. ( Id. at ¶ 19.) It also joined BB & T in the action, asserting that “responsibility for the payment of the ... tax assessments ... rests with the FDIC and/or BB & T as successors and as receivers of the assets of Colonial Bank.” ( Id. at ¶ 33.)

V. Discussion

The parties agree that the disputed motion turns on a single legal question: did BB & T agree to assume excise taxes owed to the ADOR under its Purchase and Assumption Agreement with the FDIC? BB & T contends that it agreed to take on only certain liabilities—namely, those specifically described in § 2.1 of the Purchase and Assumption Agreement. The ADOR essentially agrees with BB & T on this point, but with the added caveat that § 2.1 included the tax obligations at issue here. After carefully considering the federal statutory scheme governing bank takeovers, Alabama law, and the Purchase and Assumption Agreement attached to the motion to dismiss, the Court finds that the ADOR failed to allege sufficient facts to state a legally cognizable claim against BB & T.

A. The relevant law

1. The federal scheme for dealing with bank failures

Dealing with a bank failure usually requires a three-step process. First, either the authority that chartered the bank or the FDIC closes the failed institution and appoints a fiduciary. 12 U.S.C. § 1821(c)(3), (9). Typically the FDIC, like it did here, takes on that job by becoming the failed bank's receiver. Second, the fiduciary marshals the failed bank's assets by identifying all potentially valuable ownership interests held by the institution. Third, the fiduciary handles the outstanding claims against the failed bank. See id. § 1821(d)(2)(H).

Upon its appointment as receiver, the FDIC “steps into the shoes of the [failed bank] and operates as its successor.” In re Shirk, 437 B.R. 592, 600 (S.D.Ohio 2010); see also12 U.S.C. § 1821(d)(2)(A) (“the [FDIC] shall ... by operation of law, succeed to—(i) all rights, titles, powers, and privileges of the insured depository institution....”); O'Melveny & Myers v. FDIC, 512 U.S. 79, 86, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994) (stating that FDIC “steps into the shoes” of failed savings and loan banks); Gibson v. RTC, 51 F.3d 1016, 1025 (11th Cir.1995). As receiver, the FDIC can “transfer any asset or liability of the institution in default ... without any approval, assignment, or consent with respect to such transfer.” 12 U.S.C. § 1821(d)(2)(G)(i)(II). The FDIC, therefore, can use this power to transfer an asset “while retaining a related liability” so that “no liability is transferred to an assuming institution ... absent an express transfer.” Shirk, 437 B.R. at 600;see also Jonathan R. Macey, Geoffrey P. Miller, & Richard Scott Carnell, Banking Law & Regulation 742 (3d ed. 2001) (“If some liabilities are excluded, then the acquirer will not assume them.”).

The express terms of a purchase and assumption agreement hence govern whether an acquiring institution takes on a given liability to the failed institution's creditors. So a party entering into a purchase and assumption agreement with the FDIC assumes the failed bank's liabilities only to the extent called for in the contract. In other words, when the contract remains silent as to whether an acquirer has agreed to assume a given liability, the default rule is that it has not and that those liabilities remains with the FDIC. See, e.g., Payne v. Security Sav. & Loan Ass'n, F.A., 924 F.2d 109, 111 (7th Cir.1991) (holding FDIC “is the successor to a failed thrift's liabilities unless [it] expressly designates otherwise”); Kennedy v. Mainland Sav. Ass'n, 41 F.3d 986, 990–91 (5th Cir.1994) (“The federal receiver such as the FSLIC or RTC has the power to sell an asset ... while retaining a related liability, and no liability is transferred to an assuming institution such as Old Southwest absent an express transfer.”); Lawson v. Household Bank, 20 F.3d 786, 788 (7th Cir.1994) (stating the plaintiff's claims against successor bank had to be based on the P & A agreement between the RTC and the successor bank “under which the latter acquired certain deposits and assumed certain liabilities”). Otherwise, potential suitors would have to investigate thoroughly the extent of the liabilities on the failed bank's books, in turn making it more difficult for the FDIC to find an acquirer posthaste.³See Vernon v. RTC, 907 F.2d 1101, 1109 (11th Cir.1990) (“very few, if any, banks would enter into purchase and assumption agreements with a federal receiver if the successor banks had to assume the latent claims of unknown magnitude of shareholders like appellants”); FDIC v. Newhart, 892...